What are the best practices for budget control in scheduling management?

1 What is CPI?

CPI is a ratio that compares the value of the work completed to the actual cost incurred. It is one of the key indicators of earned value management (EVM), a method that integrates scope, cost, and schedule to monitor and control project performance. CPI can help you assess whether your project is over or under budget, and how much work remains to be done.

2 How to calculate CPI?

To calculate CPI, you need to know two values: the earned value (EV) and the actual cost (AC). EV is the value of the work that has been completed so far, based on the original budget. AC is the amount of money that has been spent so far. CPI is simply the ratio of EV to AC, or CPI = EV / AC. For example, if your project has an EV of $50,000 and an AC of $40,000, your CPI is 1.25, which means you are spending less than planned.

3 What does CPI mean?

CPI can tell you a lot about your project's cost performance. A CPI of 1 means that you are on budget, a CPI greater than 1 means that you are under budget, and a CPI less than 1 means that you are over budget. The higher or lower the CPI, the more or less efficient you are in using your resources. However, CPI alone does not tell you the whole story. You also need to consider other factors, such as the schedule performance index (SPI), the budget at completion (BAC), and the estimate at completion (EAC).

4 How to use CPI for budget control?

CPI can help you control your budget by allowing you to forecast the future cost of your project and take corrective actions if needed. One of the ways you can use CPI is to calculate the EAC, which is the expected total cost of your project at completion. EAC can be calculated using different formulas, depending on the assumptions you make about the future performance of your project. One of the simplest formulas is EAC = BAC / CPI, which assumes that the current CPI will remain constant until the end of the project. For example, if your project has a BAC of $100,000 and a CPI of 0.8, your EAC is $125,000, which means you will need more money than planned to finish your project.

5 How to improve CPI?

If your CPI is less than 1, you may want to improve it by finding ways to reduce your costs or increase your value. Strategies you can use include reviewing your scope to eliminate unnecessary tasks, negotiating with suppliers or contractors for better prices, optimizing processes and resources to avoid waste, implementing quality control measures to prevent defects, and adjusting your schedule or resources to align with your budget.

6 How to report CPI?

CPI is one of the metrics that you should report to your stakeholders on a regular basis, along with other EVM indicators. You can use charts, graphs, or tables to show your CPI and its trend over time. You can also compare your CPI to a baseline or a target, and explain the reasons for any variances or changes. Reporting CPI can help you communicate your project's status, progress, and issues, and gain support and feedback from your stakeholders.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?